Anyone read the book? One of my favorites, and I buy all the sequels.

It is the quintessential blend of commerce and camaraderie: you hire a real-estate agent to sell your home. She sizes up its charms, snaps some pictures, sets the price, writes a seductive ad, shows the house aggressively, negotiates the offers, and sets the deal through to its end. Sure, it's a lot of work, but she's getting a nice cut. On the sale of a $300,000 house, a typical 6 percent agent fee yields $18,000. Eighteen thousand dollars, you say to yourself: that's a lot of money. But you also tell yourself that you could never have sold the house for $300,000 on your own. The agent knew how to ---what's the phrase she used?---"maximize the house's value." She got you top dollar, right? Right?

A real-estate agent is a different breed of expert than a criminologist, but she is every bit the expert. That is, she knows her field far better than the layman on whose behalf she is acting. She is better informed about the house's value, the state of the housing market, even the buyer's frame of mind. You depend on her for this information. That, in fact, is why you hired an expert. As the world has grown more specialized, countless such experts have made themselves similarly indispensable. Doctors, lawyers, contractors, stockbrokers, auto mechanics, mortgage brokers, financial planners: they all enjoy a gigantic informational advantage. And they use that advantage to help you, the person who hired them, get exactly what you want for the best price.

Right? It would be lovely to think so. But experts are human, and humans respond to incentives. How any given expert treats you, therefore, will depend on how that expert's incentives are set up. Sometimes his incentives may work in your favor. For instance: a study of California auto mechanics found they often passed up a small repair bill by letting failing cars pass emissions inspections---the reason being that lenient mechanics are rewarded with repeat business. But in a different case, an expert's incentives may work against you. In a medical study, it turned out that obstetricians in areas with declining birth rates are much more likely to perform cesarean-section deliveries than obstetricians in growing areas---suggesting that, when business is tough, doctors try to ring up more expensive procedures. It is one thing to muse about experts' abusing their position and another to prove it. The best way to do so would be to measure how an expert treats you versus how he performs the same service for himself. Unfortunately a surgeon doesn't operate on himself. Nor is his medical file a matter of public record; neither is an auto mechanic's repair log for his own car.

Real-estate sales, however, are a matter of public record. And real-estate agents often do sell their own homes. A recent set of data covering the sale of nearly 100,000 houses in suburban Chicago shows that more than 3,000 of those houses were owned by the agents themselves. Before plunging into the data, it helps to ask a question: what is the real-estate agent's incentive when she is selling her own home? Simple: to make the best deal possible.

Presumably this is also your incentive when you are selling your home. And so your incentive and the real-estate agent's incentive would seem to be nicely aligned. Her commission, after all, is based on the sale price. But as incentives go, commissions are tricky. First of all, a 6 percent real-estate commission is typically split between the seller's agent and the buyer's. Each agent then kicks back roughly half of her take to the agency. Which means that only 1.5 percent of the purchase price goes directly into your agent's pocket. So on the sale of your $300,000 house, her personal take of $18,000 of commission os $4,500. Still not bad, you say. But what if the house was actually worth more than $300,000? What if, with a little more effort and patience and a few more newspaper ads, she could have sold it for $310,000? After the commission, that puts an additional $9,400 while she earns only $150, maybe your incentives aren't aligned after all. (Especially when she's the one paying for the ads and doing all the work.) Is the agent willing to put out all the extra time, money, and energy for just $150? There's only one way to find out: measure the difference between the sales data for houses that belong to real-estate agents themselves and the houses they sold on behalf of clients.

Using the data from the sales of those 100,000 Chicago homes, and controlling for any number of variables---location, age and quality of the house, aesthetics, whether or not the property was an investment, and so on---it turns out that a real-estate agent keeps her own home on the market an average of ten days longer and sells it for an extra 3-plus percent, or $10,000 on a $300,000 house. When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer---$150---is too puny an incentive to encourage her to do otherwise.

Freakonomics was written by Steven D. Levitt & Stephen J. Dubner. It's a really good book.

YES. Love your example....never assume your realtor's interests line up perfectly.

Disclaimer: I'm a licensed agent.

Here's a different perspective...

The agent that sells their own home has be best client, themselves. They, as homeowners, know how to maintain their home and know what to upgrade that attract buyers, and know the value of doing so. They also know WHEN to sell their home and how to stage it, prep it for showings, and do so diligently.

Because the agent knows the risks, and has no one but themselves to disappoint if the risks don't pay off, agents are more willing to take a chance rather than having their clients take a risk, especially when the client wants the house sold.

Agents don't always sell when they need to. Sometimes they sell when they think the market is right and pull it off the market if it doesn't get the price they want. These are tactics that no client would put up with.

I was sputtering and choking on those firs two paragraphs - hoping they were sarcastic. It's not that an agent knows my market better, or any of that. But I recently sold with an agent because she has the time to communicate / follow up with everybody, take the phone calls, etc - while I was at work (paycheck job). She also happens to have a lot of experience in the area, and owns and manages rentals too. I got two good referrals during the process as a bonus - for a cleaning lady and a handy man.

I completely disagree with the first two paragraphs cited from the book. We interviewed three agents to list our personal residence, and they were all dead wrong about the value of our house. Their estimates were that it would sell for $234K-$250K. It sold in a day for $10K over our asking price of $260K. But we'd been living in that neighborhood for 15 years and I'd been watching listings for a year and a half. I guarantee you no RE agent knew that neighborhood as well as I did.

Charlie,

I had to Google Freakonomics. I have not read this book which was first published several years ago.

Today, is when my 60 day listing expires. I went by the house yesterday and picked-up the business cards of 6 locals agents who have shown this house. One of these agents has a billboard in town boasting her 17 million in RE sales!

RE agents love to brag (and advertise) about all of the million dollar plus in RE sales they have accumulated in the past year. They love to tell everyone about the million dollar house they sold last week. What they will not tell you is WHY they can't sell some 'nickel and dime' house (like mine) which is priced well below market!

Is my dilemma here an example of Freakonomics ?

Roy is selling his house. He has not been happy with his experience. I just happened to stumble over this paragraph. Thought it was germane to the discussion so posted it. No big deal!

WMH,

Yes, I am planning on doing what you suggested,..call the agents who showed the house. One of these agents is rumored to be the "Top Producer" in RE sales for my county. The flip-side of her business card reads "14 million SOLD in 2017"

I plan on making an office appointment with her and I will have only one question for her,.."Could you have this sold my house if I had chosen YOU as the listing agent?" You did show my house, but you were not the listing agent. Would you being the listing agent have made any difference here?

Before I go the FSBO route, I plan on giving another agent an opportunity to sell one of my other houses. The house here that did not sell, is going to be rented out to a person who has been 'waiting for the listing to expire' This is what so freaking crazy,...I have people on waiting lists who want to rent this house at above market rents,...but nobody seems to want to buy the house,...even at a reduced give-way price.

As a Realtor I agree with LOTF comments regarding Realtors advantages im selling their own home. They also have the benefit of asking other colleagues for their input when needed.

And there is also the reality that not all agents are equal in experience, training, knowledge or committment.

The part of LOTF comments that I disagree with "Homeowners hire agents to sell their house first, and get a higher price second". I find the opposite to be true. They select the agent who offers to get them the highest price in spite of not having any comps that support the pricing strategy. They also won't put in the effort to make their home more salable by decluttering, deep cleaning or making necessary repairs and upgrades.

As for the "top producer". There is a reason they have so much success. They are highly experienced and are selling high end products. The HO's in that price range aren't first time HO's or first time sellers. They completely understand what is required to get top dollar and they have the means to sit on the property until they get an offer that they consider acceptable. The majority of sellers do not have the luxury to emulate the high end sellers or agents and for the most part the top producers are inaccessible to them.

I read the original Freakonomics book. I found it very interesting, but I have not kept up with his new books.

Realtors: I just sold a house. I hired a top sales realtor who has statistics of selling 75% of her listings within 30 days. I followed her advice. I had 3 full price offers in two weeks and sold it. Did not have to pay any closing.

I probably could have priced the house a little higher and held on, but 3 months empty would have been a bigger expense and a much larger headache. I wanted it sold within 30 days.

ROY: I think one of the biggest obstacles you have is prospective buyers can't get financing especially since you've dropped the price well below $50,000. It is very difficult to find a mortgage for $50,000 let alone under $50,000. Rather than drop your price I would have raised it to $55,000. After the downpayment of 3.5% (assuming FHA) and closing costs they would still need $50,000 in financing.

Since your Realtor isn't doing you any favors try raising it even if she objects. It will also get you more eyes. People use the price scale offered by websites which generally are in increments of $10-20,000. By going under you are missing at lot of people.

NC Investor- My listing has gone STALE. My 60-day contract expired today and I am glad to be free from my listing agent who does not give a hoot about me or my house. I have a renter who has been praying for the 30 days that she will get this house to rent. I am about to make her day.

NC INVESTOR: We don't really disagree.

You mentioned...

"The part of LOTF comments that I disagree with "Homeowners hire agents to sell their house first, and get a higher price second". I find the opposite to be true. They select the agent who offers to get them the highest price in spite of not having any comps that support the pricing strategy. They also won't put in the effort to make their home more salable by decluttering, deep cleaning or making necessary repairs and upgrades. "

Yes, that's true. I don't disagree with that in the slightest. However, I was basing my theory on not when they hire the agent, but when they have the contract in their hand. Most sellers aren't willing to walk away from an offer just to get an additional $10k knowing they could lose money or go through months more of the hassles of showings.

Like any negotiation, the person who has the best advantage to get what they want is the person in the negotiation who wants it less and is willing to walk away.

I've seen where the top performing agent in the area wasn't really so great. As I found out later that her husband was a developer, and sent all the listings to her.

forget the realtor and bury a statue of st joseph in the yard. Look up a wall st journal article from 10/30/07.

ROY: It seems that my response was eaten by the website nannies.

Two thoughts based on your community. Seller financing may be the answer.Just know that short term won't work since they will have a problem getting a mortgage to refi on such a low amount.

Your agent has been more of a hindrance than a help and I would let her broker know that. It would probably be enlightening to get some feedback from the agents who showed your property to potential homeowners but I would skip the top producer who is generating those numbers by selling high end properties for years and has most likely forgotten how to reach the audience you need to attract.

Not to be critical but I did look again at your pix and I think the property is fine for your price point but there are a few thing that could use minor fixes. The double door brown cabinet looks like it could use a coat of paint. It's very drab. The wall under the window near the kitchen also looks like the paint doesn't match but that might just be the angle of the pix. The missing piece of flooring in the bedroom needs to be repaired.

LOTF:

You are right we do agree. I didn't realize you were referring to the time after they had a contract and an offer. As for the negotiations I still think that has as much to do with their buyer's agent as it does with the seller. If the agent knows the market they should be able to council their clients. However, so much depends on the seller motivation and financial ability to hold out.